The deal was expected to be subject to approval by Oil Basins shareholders at a meeting to be held on or before Tuesday, but it was never finalised and no notice of meeting was issued to shareholders.

If it had proceeded, Fortescue would have had the right to appoint one senior representative to the Oil Basins board.

Fortescue said it had considered the investment because its operations use “a large amount of energy in the form of diesel and potentially natural gas".

“It is appropriate that we consider our long-term energy requirements," a Fortescue spokeswoman said. “We have been in discussions with Oil Basins over potential gas resources in the Canning Basin however we have been unable to agree acceptable terms on which to proceed with a transaction."

Oil Basins said it remained in talks with Fortescue about a direct acquisition of a portion of the Derby Block subject to the permit being granted.

Fortescue had agreed to invest in Oil Basins at a price of 3.5¢ per share, a 40 per cent premium to its trading price at the time the deal was announced in mid-November. Oil Basins shares closed steady at 3¢ on Tuesday.